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Chipotle’s Stock Falls Over 10% on Weak Outlook

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4Q17 performance

Chipotle Mexican Grill (CMG) posted its 4Q17 earnings after the market closed on February 6, 2018. In 4Q17, Chipotle posted adjusted EPS (earnings per share) of $1.34 on revenues of $1.11 billion. Compared to 4Q16, the company’s revenue increased 7.2%, while EPS rose 143.6%.

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Stock performance

Analysts were expecting Chipotle to post EPS of $1.32 on revenues of $1.11 billion. Also, the company has outperformed analysts’ SSSG (same-store sales growth) of 0.8% by posting SSSG of 0.9%. Despite posting better-than-expected SSSG and EPS, the company’s stock fell due to a weak outlook. During its earnings call, the company’s management stated that they expect its SSSG to rise by low single digits in 2018, with traffic in negative territory until July 2018. The SSSG guidance of low single digits was lower than investors’ expectations, which led to a decline in the company’s stock price. By the end of February 7, 2018, Chipotle was trading at a stock price of $272.21, which represents a fall of 10.7% since the announcement of its 4Q17 earnings.

Year-to-date performance

Since the beginning of 2018, Chipotle’s stock price has declined 5.8%. During the same period, the stock prices of its peers Shake Shack (SHAK) and The Cheesecake Factory (CAKE) have declined 7.7%, and 4.2%, respectively. The broader comparative indices, the S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY), have returned 0.3%, and 5.7%, respectively. XLY has invested 9.9% of its holdings in restaurant and travel companies.

Series overview

In this series, we’ll look at Chipotle’s performance in 4Q17 by comparing it with analysts’ estimates. We’ll also look at management’s guidance and analysts’ estimates for 2018. Finally, we’ll end this series by looking at the company’s valuation multiple and analysts’ recommendations.

Next, we’ll look at Chipotle’s revenue in 4Q17.

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